Law Summary
Purpose of the Investors' Lease Act
- The purpose of the Investors' Lease Act is to encourage foreign investments in the Philippines by allowing foreign investors to lease private lands for productive purposes.
- The law aims to promote industrial development and attract foreign investments by providing specific conditions and penalties for violations.
Policy and Scope of the Act
- The Act declares the policy of the State to encourage foreign investments while conserving and developing the country's own patrimony.
- It adopts a flexible and dynamic policy on granting long-term leases on private lands to foreign investors for various productive endeavors.
- The Act covers a wide range of productive endeavors, including industrial estates, factories, processing plants, agro-industrial enterprises, land development for industrial or commercial use, tourism, and similar priority projects.
Definitions
- The Act provides definitions for key terms used in the law.
- "Investing in the Philippines" refers to making an equity investment in the country through the actual remittance of foreign exchange or transfer of assets, subject to registration with the Securities and Exchange Commission.
- "Withdrawal of approved investment" refers to the failure to operate the investment project for three consecutive years or the outright abandonment of the project during the approved lease period.
Conditions for Foreign Investors
- The Act allows any foreign investor investing in the Philippines to lease private lands subject to certain conditions.
- The maximum lease period is 50 years, renewable once for an additional 25 years.
- The leased area should be used solely for the purpose of the investment, as agreed upon by both parties.
- The leasehold right acquired under long-term lease contracts can be sold, transferred, or assigned, but the conditions and limitations of the Act continue to apply if the buyer, transferee, or assignee is a foreigner or a foreign-owned enterprise.
Limitations on Foreign Individuals and Entities
- The Act imposes limitations on foreign individuals, corporations, associations, or partnerships not otherwise investing in the Philippines.
- The withdrawal of the approved investment within the lease agreement period or the unauthorized use of the leased area for a different purpose will result in the termination of the lease agreement, with the lessor entitled to compensation for damages suffered.
- Lease agreements renewable at the option of the lessee are subject to mutual agreement, and the foreign lease must demonstrate social and economic contributions to the country for renewal after 50 years.
- For tourism projects, the lease of private lands by foreign investors requires a minimum investment of $5 million, with 70% of the investment infused within three years from the signing of the lease contract.
Authority of the Secretary of Trade and Industry
- The Secretary of Trade and Industry has the authority to terminate any lease contract entered into under the Act if the investment project is not initiated within three years from the signing of the lease contract.
Penal Provisions
- The Act includes a penal provision, stating that any contract or agreement made in violation of the prohibited acts will be null and void.
- Both contracting parties will be subject to fines ranging from PHP 100,000 to PHP 1,000,000, imprisonment for six months to six years, or both.
- Prohibited acts include stipulating a lease period exceeding the limit set by the Act, using the leased premises for purposes contrary to existing laws, and entering into agreements resulting in the lease of land exceeding the approved area.
Separability and Repealing Clauses
- The Act includes a separability clause, stating that if any provision or its application is deemed unconstitutional, the remaining provisions of the Act will not be affected.
- It also includes a repealing clause, stating that all acts, rules, and regulations contrary to or inconsistent with the Act are repealed or modified accordingly.
Effective Date
- The Act took effect immediately upon its approval on June 4, 1993.